Improving Reward at InterContinental Hotels Group

Nicos Nicolaides is Compensation and Benefits Director at InterContinental Hotels Group (IHG). Fresh from speaking at the Compensation and Benefits Forum in Dubai, he details the steps IHG has taken to improve its reward offering and how these now align better with business goals.

How has IHG transformed incentive plans to align them with key business strategies?IHG is a global hospitality organisation with more than 4,900 hotels. Our strategy is based on being number one for our employees, number one for guests, and number one for our shareholders.

To achieve this, we need a people strategy that creates world-class engagement, and any design of an incentive programme has to align to this approach.

Pre-2014, IHG had a hotel incentive plan for senior management that took the vanilla approach of rewarding profitability. There is nothing wrong with that, but it was felt that we needed to transform the performance culture (as well as aligning it to the key business strategies), in particular, in our growing markets such as Middle East/Africa.

So, we decided to sit down and consider all the design principles. The usual suspects such as affordability, market competitiveness, simplicity and recognising and rewarding higher performance all appeared. However, the one item that really dominated the discussion was coming up with a plan that would influence our leadership behaviours.

This took the form of basing the scheme on the new 10 Hotel Winning Metrics. This is a scorecard that not only includes financial measures such as profit and revenue, but also measures such as employee engagement, guest satisfaction and loyalty – factors that also have a positive impact on the longer term success of the property. Apart from a minimum profit threshold, bonuses were then calculated on the number of Winning Metrics achieved. The more you achieved, the greater the award as a percentage of salary.

It was easy for all participants to understand. Each Winning Metric was a ‘hit’ or ‘miss’. It was also part of a cultural shift; Winning Metrics (and hence the incentive plan) featured in all the team meetings and the monthly scorecards generated throughout the year that kept participants in the know. It helped them with action plans to turn as many ‘misses’ into ‘hits’ by the end of the year.

What effect have these changes had on KPIs?So how effective was it after the first year? Well, it was an incentive plan that encouraged the senior management to deliver a rounded business performance. The results were encouraging. The more Winning Metrics achieved by the business unit, the stronger a correlation to greater absolute profitability, greater absolute guest satisfaction, greater absolute employee engagement, and more.

Are there any overriding trends in the compensation and benefits area? Where do you see things moving in the future?
Executing the concept of total reward will become more critical. It’s not just about the money; organisations will need to capture broader themes such as health and wellbeing and financial education. What differentiates you today will become the norm in the future.

Understanding your workforce is vital to designing a reward proposition that meets its needs. The technological advancements in systems and social media will make it easier to get a grip on employee segmentation and analytics, but don’t think this will reduce your working week. Instead, it’s going to lead you to more opportunities to make a difference.

What differences do you see between the Middle East and the rest of the world when it comes to compensation and benefits?
With its multi-component approach, the Gulf is pretty much a unique region when it comes to reward. Explaining to a HR colleague outside the region that we provide a housing allowance to an employee on a local contract takes them by surprise, and you have to emphasise that it is standard market practice here. When you look at base salary as a percentage of total remuneration in IHG, Middle East has the lowest figure globally by far.

So, the challenge of total reward communication is arguably more important in the Middle East. IHG provides housing allowances, flight allowances, education assistance – items that are not prevalent in countries such as the UK. Therefore reward design should be on a holistic basis. You may end up with employees creating noise on one particular benefit which is perceived as uncompetitive when your overall packages are well above market.

I expect over time, reward in the region will become more simplified and offer flexibility. However this is a considerable time away from being common.

What advice would you give to fellow compensation and benefits professionals?The success of a senior reward professional is 25% technical and 75% stakeholder management and communication, so make you and your team visible to the business. If you don’t, you’ll never be invited to the party as a strategic partner.

Make you and your team visible to the employees. Reward will not effectively build engagement if staff do not understand and appreciate it.

Finally, make sure you and the team are visible externally. The world does not stand still, so keep up with the emerging trends and innovate where you can and take a lead.

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